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Real World Scenarios

Real World Scenarios: Annuity for a 90-year-old

Our series of real world scenarios continues. A bank executive talked my 90-year-old mother-in-law into purchasing an annuity to increase her yield from a CD. Is this a mistake (considering her advanced age), or was it a good move to avoid probate in the case of her death? Whether the annuity purchase was a wise move depends on the terms of the annuity she purchased. Call the insurance company and ask them the following questions: 1) What is her current... Read More

Real World Scenarios: Death Benefit Annuity Taxes

Our series of Real World Scenarios continues with a future inheritant's question regarding their father's death benefit annuity. My elderly father has an annuity. When he passes away, will I be taxed only on the gain, or will I be taxed on the entire amount? If your father dies his heirs are taxed on everything above his initial cost basis. For example, if he initially invested $100,000 in a non-qualified plan that has grown to $250,000 by the time of his death, you... Read More

Real World Scenarios: Variable Annuity Transfer

Here is the next installment in our series of questions from people like you. A broker suggested that I move my grand-fathered life insurance policy into a variable annuity for better performance. Is this a wise move? We don’t think so. Grand-fathered single premium life policies (SPLs) were such a good thing that the IRS disallowed them on June 21, 1988. People who already owned them were allowed to keep them — hence the term “grand-fathered.” They are tax-free... Read More

Real World Scenarios: Annuity Fees and Value

Our series of Real World Scenarios continues: The guy on the radio says to buy the Vanguard annuity, and that it is the best because the fees are so low. What should I do? I don’t know that he said it was the best, but I’ll take your word for it. I’ve heard several people on the radio and read several newsletters making similar claims, and personally it bothers me when I hear it. Vanguard is a very good company in my opinion, and second-to-none when it... Read More

Real World Scenarios: Fixed Annuity Vs. Variable Annuity

Here is a real world question regarding fixed and variable annuities. On the advice of my financial planner, I moved my fixed annuity to a variable annuity and now my value is down. What should I do? I really don’t have enough information to give you a specific answer -- I would need to see if you are qualified for the variable annuity by assessing your risk tolerance, time frame, and goals, and understand the value of the annuity, the percentage of your assets that the... Read More

Real World Scenarios: Variable Annuities Vs. Mutual Funds

The next entry in our series of Real World Scenarios: What are the primary differences between mutual funds and variable annuities? Annuities and mutual funds can each play an important part in a financial plan. However, they are different products, designed to meet different needs and time horizons. Both offer professional money management and pooled investment vehicles. Mutual funds may be appropriate for intermediate- and long-term goals. There are many types of... Read More

Real World Scenarios: Variable Annuity Risks

Here is the fourth real world scenario in our series. I know with a variable annuity I can invest in sub-accounts that are based on funds that contain various mixtures of stocks, bonds and money markets, but what are the actual risks involved? That's a very good question. If you purchase a variable annuity, you run the risk of the underlying investments performing poorly. This risk is balanced by the potential of receiving a higher return than would be... Read More

Real World Scenarios: Sub-Accounts in Variable Annuities

The third entry in our series of Real World Scenarios follows. I have been researching variable annuities and one of the things that attracts me to them is the fact that many will allow me to switch between the different sub-accounts without taxes or penalties. How do you feel about switching between the different sub-accounts, and specifically, “market-timing” in annuities? I truly appreciate the fact that most variable annuities allow you a minimum of 12... Read More

Real World Scenarios: Variable Annuity Comparison

Following is the latest blog entry in our series of real world scenarios. How do I evaluate all of the different variable annuities available on the market? Is there a rating system? It's very confusing and there are so many options to choose from. To date, there is no official rating system to evaluate the 700+ variable annuities on the market. That said, there are a multitude of criteria to look at when evaluating variable annuity contracts. At Annuity FYI we have... Read More

Real World Scenarios: Variable Annuities Purchase

This blog post will begin a series of real life questions and answers from Annuity FYI members. When considering the purchase of a variable annuity, should I pay attention to the total assets under management of the insurance company issuing the annuity? Sub-accounts with smaller assets can be a benefit, primarily because a smaller sub-account is more easily managed, has fewer securities in it, and the manager(s) can pay greater attention to stock / bond ... Read More

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